Don’t Miss Out on Incredibly Low Mortgage Rates — Why Now Could Be the Right Time To Refinance
Many people treat their mortgage as a “set it and forget it” kind of financial commitment. This isn’t necessarily the best approach since refinancing your mortgage could save you tens of thousands of dollars over the life of your loan.
Interest rates are currently at historic lows, making now a great time to revisit your mortgage terms. Refinancing your mortgage can help you lower your monthly payments, all while saving big on interest charges.
Lenders are offering amazing mortgage terms in 2021. If you want to save money on your mortgage, read on to find out how to take advantage of the current financial landscape.
Why Is Now Such a Good Time to Refinance?
The main reason to consider refinancing right now is simple: average mortgage rates haven’t been this low in more than 50 years.
Financial institutions like Freddie Mac keep track of nationwide average mortgage rates, and in 2020, they fell to just 3.11% for a 30-year home loan. Looking back just a couple of years to 2018, the average rate for a 30-year mortgage was 4.54%. That works out to a drop of more than 31%.
So, even if you only took out your home loan a couple of years ago, there’s a good chance you could find a better deal by refinancing now. Plummeting interest rates are good news for homeowners.
What Are the Benefits of Refinancing?
Refinancing your mortgage offers many potential benefits. You can:
- Lower your monthly mortgage payments, giving you extra money to spend on other household expenses
- Shorten your loan term, becoming mortgage-free years sooner than you otherwise would have
- Access your built-up equity to reinvest in your home or use for other major expenses
How Much Could I Save?
To illustrate your potential savings, we’ve run some numbers using 2018 rates. In 2018, the average rate for a 30-year mortgage was 4.54%. With this in mind, let’s take a look at how much you could save.
Assuming your home is worth $250,000 and you make a 10% down payment, your average monthly payment would be $1,310 at average 2018 rates. In 2020, carrying the exact same home with the exact same down payment would cost just $1,127 per month.
Those savings work out to $183 per month or $2,196 per year. Over a 30-year term, our theoretical homeowner would save $65,880 by refinancing a mortgage from 2018 at 2020 interest rates.
Your actual savings will vary, depending on your original mortgage rate, the value of your home, and the amount of equity you have built up. But this much is clear: refinancing your mortgage right now can save you thousands of dollars every year.
But Wait: Should I Hold Out for Even Lower Rates?
Nobody has a crystal ball, and even the wisest and most experienced economist can’t predict the future with absolute certainty. However, this much is true: mortgage rates are unlikely to fall much lower than they are right now.
Many experts believe that interest rates will rise in 2021 and beyond, taking mortgage rates with them. As the economy recovers from Covid-19, some analysts expect inflation to follow. This is important because inflation tends to send interest rates up.
You could wait and see if they go down, but most financial experts don’t believe they have much more leeway to drop. Waiting for rates to fall even lower could be a costly mistake since they are more likely to rise than fall while you wait.
Act Now Before Rates Go Up
If you haven’t already refinanced your mortgage, now is the time to act. Mortgage rates haven’t been in this range in decades, and they are poised to start rising again.
Every borrower’s case is different, and the only way to know for sure how much you stand to save is to get a quote from a reputable lender. It only takes a few minutes to find out how much you could save.